I'm looking into this at the moment too. Friendly societies have tax free savings plans for children where you can save up to £25 a month till they reach 18 or 21. My parents did this for me years ago and it helped pay the deposit on my first flat
I'm not sure how good the return is- the scottish friendly site anticipated a growth of 3.5%, my children have a Nationwide savings account with guaranteed 5% interest. I suppose you could always hide the bank book till they're older.